【研究报告内容摘要】
Low-end capacity to be further squeezed out – MIIT announced that it wouldshut down a total of 67 low-end small paper mills by the end of this year at anaggregate of 1.2m t. On top of that, MIIT unveiled the closure of 274 paper millswith total capacity of 6.35m t by end-2013. Thus, China would cut 2013 paper millcapacity by a total of 7-8m t or approx. 7-8% of total supply, compared with closing5.4/8.3/9.7m t in 2010/11/12. More importantly, MIIT stressed that those targetedmills would not reopen again elsewhere. The cyclical paper sector has recentlybounced on the back of good PMI data. However, paper is a laggard versus cementand steel. The closure newsflow should thus trigger short covering in the near term.
Maintain Buy on Nine Dragons and Lee & Man with relatively low valuations of0.9x and 1.6x P/B, respectively.
PMI momentum to prompt increased likelihood of ASP inflation – China PMI ofJul and Aug beat market expectations to reach 50.3 and 51.0, meaning buoyantmanufacturing activities. We believe the better demand side should help inflatecontainerboard ASP from Oct.
Nine Dragons FY13 results likely to beat expectations – ND will post FY13results at end-Sep. We project net profit increased by 5% to Rmb1.49bn againstmarket consensus of Rmb1.525bn. We believe ND may beat the Street forecasts onhigher than expected FX gain for RMB appreciation due to increasing US$ loanexposure. US$/HK$ constituted one third of its gross debt in 1HFY13. This ratioshould further increase by end-FY13.